WASHINGTON (Thursday, Nov. 18, 2010) – The Senate Judiciary Committee Thursday approved legislation to combat copyright infringement and the sale of counterfeit goods online. The bipartisan Combating Online Infringement and Counterfeits Act was introduced in September by Committee Chairman Patrick Leahy (D-Vt.) and senior Republican member Orrin Hatch (R-Utah). The Committee voted unanimously, 19-0, to send the legislation to the full Senate for consideration.

The bill provides law enforcement with important tools to stop websites dedicated to online piracy and the sale of counterfeit goods. The illegal products offered through these websites, which are often foreign-owned and operated, range from new movie and music releases, to pharmaceuticals and consumer products. Intellectual property theft costs the U.S. economy more than $100 billion every year, according to estimates, and result in the loss of thousands of jobs.

“Rogue websites are essentially digital stores selling illegal and sometimes dangerous products. If they existed in the physical world, the store would be shuttered immediately and the proprietors would be arrested,” said Leahy. “We cannot excuse the behavior because it happens online and the owners operate overseas. The Internet needs to be free – not lawless. The Combating Online Infringement and Counterfeits Act will give the Department of Justice a new and more efficient process for cracking down on rogue websites, regardless of where overseas the criminals are hiding.”

“The Internet serves as the glue of international commerce in today’s global economy. But it’s also been turned into a tool for online thieves to sell counterfeit and pirated goods, making hundreds of millions of dollars off of stolen American intellectual property,” said Hatch. “This legislation that garnered unanimous support from Democrats and Republicans alike in the Judiciary Committee will help in our continued fight against online piracy and counterfeiting. Allowing industry stakeholders and law enforcement officials to better coordinate their efforts will allow us to better target those who are profiting from this illegal and costly activity.”

The Combating Online Infringement and Counterfeits Act will give the Department of Justice an expedited process for cracking down on websites that are dedicated to making infringing goods and services available. The bill will authorize the Department of Justice to file an in rem civil action against a domain name, and seek a preliminary order from the court that the domain name is being used to traffic infringing material. The bill also provides safeguards allowing the domain name owner or site operator to petition the court to lift the order, and safeguards against abuse by allowing only the Justice Department to initiate an action, and by giving a federal court the final say about whether a particular site would be cut off from supportive services.

The bill has received strong support from labor unions, the Newspaper Association of America, the U.S. Chamber of Commerce, the National Association of Attorneys General Intellectual Property Committee, the music, movie and television industries, authors and publishers, and anti-piracy organizations such as the Coalition Against Counterfeiting and Piracy and the International Anti-Counterfeiting Coalition.

In June, the Senate Judiciary Committee held the first oversight hearing with the Intellectual Property Enforcement Coordinator (IPEC), Victoria Espinel. The IPEC was established by the 2008 Prioritizing Resources and Organization for Intellectual Property (PRO-IP) Act. The Coordinator chairs an inter-agency committee, and was tasked with producing a joint strategic plan to combat piracy and counterfeiting. The PRO-IP Act was designed to address intellectual property rights enforcement concerns and to protect American innovation and advancement.

On The Combating Online Infringement And Counterfeits Act
November 18, 2010

I am pleased to have introduced the bipartisan Combating Online Infringement and Counterfeits Act with Senator Hatch, who has been a long-time partner of mine on intellectual property issues. Senators Klobuchar and Whitehouse raised the profile of this important issue at our hearing earlier this year with the Intellectual Property Enforcement Coordinator. I have worked with those Senators and the other nine Committee cosponsors, in consultation with Senator Sessions, to carefully craft legislation which will protect American companies, American jobs and American consumers from online infringement and counterfeit products.

This legislation provides law enforcement with an important and improved mechanism to stop rogue websites that are dedicated to online piracy and the sale of counterfeit goods. Protecting intellectual property is not uniquely a Democratic or Republican priority – it is a bipartisan priority, and this legislation is a great example of our ability to come together to on an issue that is critical to our economic and job growth.

Each year, online piracy and the sale of counterfeit goods cost American creators and producers billions of dollars, and result in the loss of hundreds of thousands of jobs. This impacts companies of all types and sizes, the people who work there, and consumers who rely on the authenticity of the products they purchase.

Rogue websites are essentially digital stores selling illegal and sometimes dangerous products. If they existed in the physical world, the store would be shuttered immediately and the proprietors would be arrested. We cannot excuse the behavior because it happens online and the owners operate overseas. The Internet needs to be free – not lawless.

What these rogue websites do is theft, pure and simple. Some have argued that the conduct should be excused as free speech because it happens on the Internet. That argument contradicts the basic tenet of copyright law which, as Justice O’Connor explained, is the very “engine of free expression.” Ensuring that creators have the exclusive right to be compensated for their work is not only a critical characteristic of our economy, but is endowed as an essential right. Our Constitution provides for this in the Copyright Clause, and United Nations’ Universal Declaration of Human Rights, which has become a model for treaties and constitutions around the world, proclaimed this “right of authors” as inalienable. Copyright law does not exist in opposition to our guarantee of free speech, it supports it.

The Combating Online Infringement and Counterfeits Act will give the Department of Justice a new and more efficient process for cracking down on rogue websites, regardless of where overseas the criminals are hiding. The substitute amendment I offer today addresses many of the concerns that we have heard in the numerous meetings we have had with stakeholders on all sides of this issue. The amendment will ensure that a court must find the rogue website is dedicated to infringing activity before any action is required, and it contains safeguards to ensure parties required to take action have the ability to do so effectively.

This bill enjoys a broad support from American industry and workers who often find themselves at odds. The Chamber of Commerce, organized labor, content owners, and a tremendous cross-section of industry groups all support this legislation. Further, we have received extremely constructive input and assistance from the third party registrars, registries, Internet service providers, payment processors, and ad networks which will be required to take action to stop the infringing websites targeted by this legislation from doing business with United States consumers. Companies in each of those industries, which are critical to the ultimate success of this initiative, support this legislative framework.

We should not expect that enactment of the legislation will completely solve the problem of online infringement, but it is a significant first step that will make it more difficult for the most egregious infringers to profit off American hard work and ingenuity.

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Section-By-Section Summary of the Managers Amendment to the Combating Online Infringement and Counterfeits Act

Section 1. This section provides that the legislation may be cited as the “Combating Online Infringement and Counterfeits Act”.

Section 2. This section creates a new section of the United States Code with the following subsections:

Subsection (a). This subsection provides the definition for an internet site that is “dedicated to infringing activities”. Under this definition, an internet site is “dedicated to infringing activities” if (1) the website would be liable for criminal infringement because it constitutes property that is subject to forfeiture under section 2323 of title 18 (subsection (a)(1)), or (2) the website’s central design, purpose or use is to offer infringing goods and services, or counterfeit products (subsection (a)(2)).

Subsection (b). This subsection provides the Attorney General with the authority to seek a temporary restraining order, preliminary injunction, or injunction against a domain name property that is determined to be “dedicated to infringing activities” in an action commenced under subsection (c).

Subsection (c). This subsection provides the Attorney General with the authority to commence an in rem action against a domain name used by an Internet site that is “dedicated to infringing activities.” This in rem authority over a domain name is modeled after the jurisdictional provisions in the Anticybersquatting Consumer Protection Act (ACPA). This subsection specifies that the action must be brought in the judicial district where the domain name registrar or registry is located, or alternatively in the District of Columbia if neither the registrar nor the registry are located in the United States.

Subsection (d)(1). This subsection, also modeled after the ACPA, outlines criteria to be used to determine a domain name’s situs in an in rem action where either the registrar or registry is located or doing business in a judicial district within the United States, or where documents sufficient to establish control and authority regarding the disposition of registration are located in a judicial district within the United States.

Subsection (d)(2). This subsection provides grounds under which the Justice Department may still bring an action in the District of Columbia to prevent and restrain importation into the United States of infringing good and services, even where a domain name does not have a situs in the United States. Such an action requires that the domain name be used to access an infringing Internet site in the United States, and that the site’s activities have a commercial effect in the United States, as measured by certain non-exclusive enumerated criteria.

Subsection (e). This subsection authorizes a Federal law enforcement officer to deliver a copy of the court order to a domain name registrar or registry (subsection (e)(1)), an Internet services provider (subsection (e)(2)(B)(i)), a financial transaction provider (subsection (e)(2)(B)(ii)), and an Internet advertising network service (subsection (e)(2)(B)(iii)); and prescribes the action that the respective party must undertake upon receipt of the order. This subsection further provides the entity taking action under this subsection with immunity from any related cause of action (subsection (e)(5)).

Subsection (f). This subsection requires the Attorney General to inform the Intellectual Property Enforcement Coordinator (IPEC) and other law enforcement agencies of any order issued under this section, and requires the IPEC to post the domain name against which an order has been issued, along with other relevant information, on a publicly available website.

Subsection (g). This subsection provides the Attorney General with the authority to bring an action against a party that knowingly and willfully fails to comply with an order delivered under subsection (e). This subsection further provides that a showing by the defending party that it does not have the technical means to comply with an issuance of the order serves as a defense to an action brought under this subsection to the extent that it causes the inability to comply.

Subsection (h)(1). This subsection authorizes the Attorney General to seek a modification of the court order to include an additional domain name(s) where an Internet site that is “dedicated to infringing activities” is able to be accessed by that different domain name(s). This subsection addresses the problem of an Internet site that is “dedicated to infringing activities” otherwise reemerging under a different domain name to avoid the implications of an order that is issued against it.

Subsection (h)(2). This subsection authorizes the defendant or owner or operator of the domain name to seek a modification, suspension or vacation of the court order where the Internet site associated with the domain name is no longer dedicated to infringing activities, or where the interests of justice require.

Subsection (h)(3). This subsection authorizes a party to move for dismissal of the order where the domain name has been deleted following expiration of its registration, and has been re-registered by a different party.

Subsection (i). This subsection is a savings clause to ensure that this Act is not construed to limit other civil or criminal remedies available under current Federal or State law.

Section 3. This section requires the Attorney General to publish procedures and provide guidance to carry out the activities of this section in coordination with those harmed by the illegal activity, as well as other law enforcement agencies.

Section 4. This section requires the Secretary of Commerce to study and report to Congress on this legislation’s impact on the ability of an entity described in subsection (e) to effectively use Domain Name System Security Extensions.